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BOARD OF SUPERVISORS OF LAMAR COUNTY v. HATTIESBURG COCA-COLA BOTTLING COMPANY

JANUARY 18, 1984

BOARD OF SUPERVISORS OF LAMAR COUNTY
v.
HATTIESBURG COCA-COLA BOTTLING COMPANY



ON PETITION FOR REHEARING

EN BANC

BROOM, PRESIDING JUSTICE, FOR THE COURT:

Tax exempt status of property of a corporation, Hattiesburg Coca-Cola Bottling Co., (Coca-Cola herein), and the constitutionality of the claimed exemption is chief issue here. Mississippi Code Annotated 27-31-1, 57-3-33 and 57-1-47 (1972); Article 7, 182 Mississippi Constitution (1890). The lower court, the Circuit Court of Lamar County, upheld Coca-Cola's claim of tax exemption *fn1 and on appeal here the Supreme Court reversed and remanded for further proceedings. We now withdraw our former opinion and affirm (with modification) the lower court judgment which ruled that Coca-Cola was entitled to the tax exemption.

 Pertinent facts were stipulated in the lower court. In the record are several documents which the parties agreed were relevant to the issues. On November 20, 1978, Coca-Cola and appellant Lamar County (County) entered into a "memorandum of agreement" , providing for issuance by the County of industrial revenue bonds as authorized by Title 57, Chapter 3, Mississippi Code Annotated (1972) to provide funds for Coca-Cola to build a bottling plant (the project) in Lamar County. Coca-Cola was responsible for acquiring the property, building and equipping the plant and conveying it to the County. Lamar County was then to lease the project back to Coca-Cola for rent sufficient

 to pay the principal, interest, and redemption premium on the bonds. The rent was to be the sole source of revenue from which to pay the bonds. Also, the agreement provided that Coca-Cola would have the option to purchase the project for an amount sufficient to retire the bonds plus a "nominal amount."

 Pursuant to the agreement, Coca-Cola obtained real property on which to locate the project and conveyed it by warranty deed to Lamar County who then leased it back to Coca-Cola. The lease agreement, dated June 1, 1979, provided that Coca-Cola was required to maintain and repair the project, purchase insurance, and to pay all "lawful" taxes. Lamar County covenanted not to sell, convey, or assign its interest in the project without Coca-Cola's approval. Also, the County covenanted that it would not take any affirmative action which would cause or induce the assessment of ad valorem taxes on the project. The lease further provided that its primary term would expire in 1999 but may be extended or renewed. No issue is presented as to whether the proper administrative steps were taken in order for the exemption to have the approval of any appropriate state agency, board or administrative tribunal.

 Lamar County's tax rolls had listed the project as exempt but at its November 2, 1981 meeting, the County's Board of Supervisors adopted a resolution which found that the property was subject to assessment and authorized the County Tax Assessor to change the land assessment rolls to reflect that the project was not exempt. Coca-Cola filed an objection with the Board of Supervisors which was overruled. Then Coca-Cola appealed to the circuit court, which reversed the Board and held that under the lease and Mississippi Code Annotated 27-31-1 and 57-3-33 (1972) the project was exempt from ad valorem taxation.

 Presented by this appeal is one central issue: Was the project exempt from ad valorem taxation? As revealed by the circuit judge's opinion, three possible sources allow such exemption.

 Enacted by the Mississippi Legislature in the 1930's, the State's Balance Agriculture with Industry statutes, 57-1-1 et seq. and the State's Agriculture and Industry statutes, 57-3-1 et seq., were enacted to achieve the declared public policy and for public purposes of promoting and developing commercial, industrial, agricultural and manufacturing enterprises. *fn2 As enacted in 1960, the A. & I. legislation authorizes counties

 and municipalities to issue general obligation bonds and lease the enterprises to business entities. Issuance of Revenue Bonds are within the purview of 57-3-1 et seq., supra.

 Previously we have upheld the industrial development programs premised upon the legislatively declared public policy and purposes provided by statutes. Albritton v. City of Winona, 181 Miss. 75, 178 So. 799, 115 A.L.R. 1436 (1938) stated that the method adopted by the legislature has a reasonable relation to the purpose sought to be accomplished and, the end being public, that it is attained through a private channel matters not:

 The end being legitimate [here, the relief of unemployment and the promotion of the state's agricultural and industrial welfare], the means is for the legislature to choose . . .

 Manufacturing enterprises, as all will agree, will tend to relieve unemployment and both directly and indirectly furnish markets for agricultural and other products. This state, in comparison with others, has few such enterprises, and it has long sought in vain to procure them by offering them special inducements, e.g., exemption from taxations. The Legislature has determined that the public interest, as set forth in the preamble to the statute, requires the adoption of another method for procuring them, to-wit, municipal ownership in whole or in part thereof. The method thus adopted undoubtedly has a reasonable relation to the purpose sought to be accomplished . . . .

 Id. at 99, 178 So. at 804-05. (Emphasis added). The statutory industrial development programs contemplate that the proposed industry shall be operated to accomplish these purposes and the lease agreement be so designed:

 The lease, therefore, must be of such character as will insure the continued operation of the proposed industry with power in the municipality, under the supervision and control of the Mississippi Industrial Commission, to enforce the

 continued operation; in other words, the character of the lease is to be such as, in effect, to constitute the lessee the municipality's agent for operating the industry without liability on the municipality to others growing thereout. "If the end be public, it matters not that it is attained through a private channel."

 181 Miss. at 106, 178 So. at 807 (Emphasis added).

 Similar interpretations were enunciated in Craig v. North Mississippi Community Hospital, 206 Miss. 11, 39 So. 2d 523 (1949), Mississippi Milk Commission v. Vance, 240 Miss. 814, 129 So. 2d 642 (1951), and In Re Validation of $15,000,000 Hospital Revenue Bonds (Methodist Hospital Project), etc., 361 So. 2d 44 (Miss. 1978).

 Examination of the industrial enterprise agreements in this case, together with the lease agreement, shows that they were clearly executed to accomplish the public policy A. & I. purposes stated in the act, they were authorized by law, and are in all respects valid and binding upon the parties. We find that the entire project, including land, buildings, improvements, machinery, equipment and the lease agreement was, subject to the limitation of Article 7, 182 of the Mississippi Constitution of 1890, expressly exempt from ad valorem taxation by the industrial development statutes for the statutory ten (10) year period. 57-3-33, supra provides as follows:

 57-3-33. Exemption from taxation.

 The bonds authorized by this chapter, and the income therefrom, all mortgages or deeds of trust executed as security therefor, all lease or purchase agreements made pursuant to the provisions hereof, all purchases required to establish the industrial enterprise and financed by bond proceeds shall likewise be exempt from all taxation in the State of Mississippi except the contractors' tax . . . and all projects and the revenue derived therefrom from any lease thereof shall be exempt from all taxation in the State of Mississippi . . . . (Emphasis added.)

 According to 57-3-33 "all lease . . . agreements" and "all projects" shall be exempt from "all taxation" in the State

 of Mississippi, except "contractors' tax." As used in the legislation, 57-3-5 (2) defines "Project" to mean:

 . . . land, buildings, improvements, fixtures, machinery, equipment and furnishings, and all real and personal properties deemed necessary in connection therewith, or any part or combination of parts of the foregoing, whether or not now in existence, which shall be suitable for use by any of the following or by any combination thereof:

 (a) Any industrial enterprise for the manufacturing, processing, or assembling of any products of ...


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